Future Supply Chain Solutions Ltd IPO - Things you should know
1. Incorporated in March 2006, Future Supply Chain Solutions Limited (FSCSL) is going to hit primary market on December 6,2017. The issue is closing on December 8,2017. The tentative dates of allotment and listing are December 14,2017 and December 18,2017 respectively.
2. The company has set price range between Rs. 660 - Rs. 664 per share and minimum market lot consists of 22 shares.
3. This is yet another 100% Offer For Sale arrangement. The company shall not receive any proceeds from this IPO. Existing shareholders shall sell 97,84,570 shares. Participant shareholders are Investor selling shareholder Graffin and Promoter Future Enterprise Limited.
4. Out of 97,84,570, 35% shares are reserved for Retail Investors. Since the number of shares are very less, over subscription is expected as the company is growing fast and backed up by Future Group, fundamentally the company is very strong.
5. Recently, Mahindra Logistics debuted the market which operates in the similar line of business as FSCSL. The listing was poor as the share was already overpriced. However, later the share recovered and gave peanut profit to its investors.
6. FSCSL's diluted EPS as on 31.03.2017 was Rs.11.24. If we take lower and upper price band (Rs.660 - Rs.664), PE Multiple ranges between 58.72 - 59.07 which is reasonable if we compare with its only listed peer Mahindra Logistics which is trading at 66.45 PE as on December 1,2017. The share of FSCSL is already expensive, however, it is cheap in comparison with Mahindra Logistics.
7. If we look from BV (Book Value) angle, FSCSL shareholders have asked the price which is 8.82 - 8.88 times of its book as on March 31, 2017 which is fairly reasonable. Its peer is trading at nearly at the same rate i.e. 8.61 as on December 1,2017.
8. FSCSL has grown phenomenally well in the last three years. The company recorded Rs 4.18 Crore loss in Fiscal 2013. In Fiscal 2014, the company made negligible profit merely Rs.4.23 Crore. Thereafter the company gained the momentum and registered notable profit from Fiscal 2015. For Fiscal 2015, 2016, and 2017, its revenue from operation was 407.96 Crore, 519.87 Crore and Rs. 561.18 Crore respectively, representing CAGR of 17.30%. This shows the execution of plans strategically and the sign of excellent management. As the revenue from operations grew, for Fiscal 2015, 2016 and 2017, its Profit After Tax was Rs 24.66 Crore, Rs. 29.43 Crore and Rs. 45.75 Crore respectively representing CAGR of 36.20%.
9. Company's RoNW grew from -2.12% in Fiscal 2013 to 15.63% in Fiscal 2017. As it is 100% Offer For Sale, share capital will not be affected and so RoNW will not be impacted. Here it is noteworthy that, there is a sign for better RoNW in Fiscal 2018 seeing half yearly performance of the company.
10. Financial details trends is given below :
11. The comparison of FSCSL & Mahindra Logistics
12. FSCSL is promoted by Future Enterprises Limited, which is promoted by Kishore Biyani. Other entities promoted by Kishore Biyani include Future Retail Limited, Future Consumer Limited and Future Lifestyle Fashions Limited (collectively, the "Future Entities").
13. While FSCSL's business was originally established to provide supply chain and logistic solutions for its Promoter and certain of its Group Companies, it has diversified its customer base across various sectors. Its customers (except promoter and group companies) accounted for 53.50%, 50.50%,37.50% its revenue from operations for Fiscal 2015, 2016 and 2017 respectively.
14. The company's qualitative factors include ; (i) one of the largest service providers with an extensive network of facilities in a fast growing third party logistics market; (ii) comprehensive solution for supply chain requirement; (iii) diverse customer base across many sectors; (iv) at the forefront in introducing new standards of technology and automation in the logistics industry in India; (v) long standing relationship with Group Companies and (iv) Experienced management team with logistics and retail sector specific knowledge.
15. Its distribution centers and delivery network forms a
supply chain system across India. As of September 30, 2017, it runs its
contract logistics operations through 42 distribution centers across India,
covering approximately 3.84 million square feet of warehouse space and also
operates 2 distribution centers of its customers, covering approximately 0.37
million square feet of warehouse space. According to the A&M Report, its
distribution center at the Multi-modal International Hub Airport at Nagpur
(“MIHAN”) is one of the largest and most highly automated distribution centers
in India. Its distribution center at MIHAN covers approximately 0.37 million
square feet of warehousing space, housing a high-speed cross-belt sorter
system, which is the first of its kind in India, with a sorting capacity of
approximately 2,000 cases per hour. Its high-speed cross-belt sorter system
became operational in July, 2017. It also utilizes a “hub-and-spoke”
distribution model comprising 14 hubs and 106 branches across India (including
franchisees and 12 of which are co-located on the same premises as its hubs),
covering 11,235 pin codes across 29 states and 5 union territories as of
September 30, 2017. Further, during September 2017, it operated approximately
687 containerized vehicles, including 257 GPS-enabled vehicles of which 144 are
refrigerated (reefer) trucks that are owned by the company. It also operates
9,616 pallets as a part of its temperature-controlled logistics services.
16. The company provides solutions that enables its customers to
leverage its distribution network and which, it believes, optimizes the
performance, cost and efficiency of their supply chains, shortening their
lead-time to market. It offers its customers services in three key areas:
(i) Contract Logistics: warehousing, distribution and other
value-added services;
(ii) Express Logistics: point-to-point, less-than
truck-load, time-definite transportation services; and
(iii) Temperature-Controlled Logistics: cold-chain warehousing,
transportation solutions and distribution of perishable products.
Conclusion:
When any company comes up with its IPO which is 100% Offer For Sale arrangement; investors are very apprehensive as to whether to apply the IPO or not? Generally, in OFS arrangement, selling shareholders don't leave anything on plate for prospective shareholders and FSCSL is no exception. The share is littler expensive but cheaper keeping in mind Mahindra Logistic. There are no more big organised players in this industry. In India logistic industry has a lot of potential to grow which in turn benefit to its shareholders.
Since OFS is the arrangement to book the profit and take exit by existing shareholder, I never recommend to apply in OFS IPO. But, here I am NEUTRAL about this IPO. This is the market where brand name trades and fails both. This is a Future Group company and Future Group company can have the bright future...
Thank you for reading...Jai Hind
CA Prashant Seta
(Note : I write review based on my knowledge and understanding, this article reader should do his/her own research before investing.)
Hi Prashant,
ReplyDeleteI've beeen reading your blogs since august 2017.
Thanks for the effort.
In the past 3 months (oct, nov,dec), I observed that, your conclusions are differ from the actual market values.
You concluded the following: (Red=don't invest, Yellow=neutral, Green=buy the stock).
Green:
shalby
GICRE
IEX
(Godrej acrovat )
Yellow:
Future supply
Mahindra Logistics
MAS Fin
Red:
HDFC Standard
Reliance Nippon
But, all your suggestions behaved negative on the market. Either the stocks mentioned under Green are listed negatively or still under their IPO price. (exception: godrej agrovat).
Also, the stocks mentioned under neutral and red category are listed with margin and still in upper side of listing price.
Luckily, I went on and bought HDFC Standard, even after reading ur blog.
Let me try to prove my theory once again, by investing on Astron.
pls note that I'm not de-moralising you or undervalueing your efforts.
Just wanted to bring up the quality of your blogs.
Happy blogging :-)
Tbank you Mr Sundar Kannan for your constructive feedback. And I am happy that you read my blogs regularly.
ReplyDeleteWell, in Shalby and IEX, there was an opportunity to exit at paper thin margin. 52 week price is higher than issue price. I believe that both shares are fundamentally strong and will give good return in future. In GIC, my review turned out to be wrong. Further, in case of MAS, I recommended to apply. I wasn't neutral.
In Future and Mahindra, I was neutral. Both share are trading at little higher than its issue price.
In case of HDFC and Reliance Nippon. Sometimes I also wonder how fundamentals and technicals are not working in market. Both shares were little expensive but performed well. I do 20 applications, but I didn't do a single application as I believe that loss of opportunity is better than loss of capital.
I read the IPO prospectus at length and write my review. I look into the hardcore fundamentals and write. However, sometimes market behaves differently. I try to bring out the facts.
Thank you.